Bad news brewing for beer prices

December 31, 2007 10:02:32 AM PST
For those of you who plan to toast a fond farewell to 2007 tonight, there's one more thing to put on your farewell list - low beer prices. They'll be going up a lot in the next few months.

The sight of a pint of beer is essentially a universal language. It's the world's oldest and most popular alcoholic beverage, dating back to at least the sixth millennium B.C..

It's even recorded in the written history of ancient Egypt and Mesopotamia. But for beer-lovers around the world, and particularly here in the U.S. -- there's bad news brewing.

"I think you're going to see a six-pack for craft beers going up anywhere from 50-cents to a dollar beginning in February or March," Dan Gordon, owner, Gordon Biersch Bewing Co.

Dan Gordon of the San Jose-based Gordon Biersch brewing company is one of about 1,400 small, independent craft brewers in the U.S.; a sector of the beer industry that's reporting record sales growth, compared to major brewers, like Budweiser and Miller. Demand aside, the big problem is the cost of the two main ingredients --malted barley and hops -- has shot up dramatically because of massive shortages.

"The world is about 6,000-metric tons of hops short, which might not sound like a lot, but that's a lot of beer," said Ian Ward, Ph.D., Pres., Brewers Supply Group.

Ian Ward runs Brewers Supply Group, one of the largest distribution companies of beer ingredients in the U.S.. The shortages have made for a tough year and now a near empty-cooler of hops in their Hayward warehouse. Most current clients have received their supply, but others have been turned away.

"We have a waiting list of about 200 brewers long," said Ward.

Market prices of hops have quadrupled from $5 dollars to $20 dollars or more dollars per pound. Ward says the reasons range from previous years of oversupply, to a decline in crop acreage, and then recent disasters.

"A fire in Yakima last year destroyed 4% of the U.S. crop and then we've had some storms this year and disease," said Ward.

Historically, crop issues can cause consumer panic -- much like this year's protests in Mexico City, when the price of corn tortillas shot up; and then there was the uproar in Italy, when soaring wheat prices in turn spiked pasta prices.

Bad weather in 2006 and '07 has made for both poor hops and barley harvests around the world spurring record-high prices globally. To make matters worse some farmers have stopped growing barley. To make more money with the growing demand for bio-fuel crops, like rapeseed and corn.

"You have this huge crunch for ethanol production, so fields that were doing barley in the mid-west are now switching over to corn. It's subsidized, plus you know there's a huge demand for it," said Dan Gordon.

Unfortunately, that's not all; a boost in beer prices may also come from rising oil prices, which affect the cost of transportation and making glass bottles. Brewers just hope the love of beer is stronger than the cost-increase.

"Ultimately, I just hope the consumer values the wonderful work that these craft brewers are doing, and the wonderful beers that they're creating," said Ward.